I am using this morning's weakness to remove some hedges. We are now getting oversold and heading into some very strong seasonality later this week. That combination should be enough to keep the market from collapsing at a minimum. I am tempted to completely remove my hedges but I am worried about further deterioration in Europe. If it were solely an issue of a bad employment report I would be less cautious.
Sentiment is still an issue as I remain of the belief that the long side is crowded and is in need of a shake up. Rydex traders are long to a near record degree and the Investors Intelligence bears are too low. If we do see a rally related to the strong seasonality and the oversold condition I would likely quickly re-hedge as I don't believe the market will be able to do much more.